2022 has seen nothing short of a transformation in how EU member states source their energy. Together with the European Commission, they embarked on an unprecedented effort to reduce their energy dependence on Russia following its invasion of Ukraine.
To understand this shift, ECFR set up a new EU Energy Deals Tracker, which has identified 56 new energy deals that EU member states or the European Union itself have signed with third countries this year. ECFR’s team of researchers found that Italy, Germany, and the European Commission have been the most active players: striking 12, 8, and 9 deals respectively. But 18 out of the 27 member states have signed at least one new deal this year. This forms part of a major step-change when compared with the relative stability in supply of previous years.
Beneath these headlines, four key risks emerge that European policymakers should address as they work to further bolster the EU’s energy security.
Out with the old dependence, in with the new
Russia’s attack on Ukraine exposed EU states’ dependence on Russia for gas through policymakers’ limited room for manoeuvre in responding early on in the conflict. As Europeans decouple from Russia and look for new supplies, they should take care to avoid falling into new energy dependences.
Our tracker reveals that the EU and member states have so far assembled a fairly broad portfolio of new supplies; in other words, Europeans are no longer putting all their eggs in one basket. In addition, they have started importing increasing amounts of liquefied natural gas (LNG), rather than relying mostly on pipeline natural gas. This enables Europeans to tap into a larger pool of suppliers.
However, whether this translates into greater flexibility will depend on the nitty-gritty of the new deals, which are usually not public. Such questions include whether Germany has committed to importing a certain amount of Qatari gas, and whether LNG suppliers are pressuring Europeans into signing longer-term deals.
Indeed, clear warning signs are flashing above some partnerships. By investing in a gas pipeline to import Azeri gas, and relying heavily on Qatar for imports of LNG, Europeans may encounter new constraints in these challenging relationships. And, since they have become so dependent on securing any possible LNG or gas import for the near term, this puts them in a supplicant position towards the other exporters too – including Algeria, Nigeria, Egypt, and even Norway and the United States, which have now replaced Russia as the EU’s two main gas providers.
Despite the West’s current unity on Russia and Ukraine, potential frictions are in the pipeline in transatlantic relations – from China policy, to burden sharing on aid to Ukraine, to the EU’s difficulty in competing with US state aid for industries that use green tech under the Inflation Reduction Act package. These issues may intensify if a Republican president comes to power in 2025. Anything other than a temporary increased reliance on the United States’ “freedom gas” would therefore represent a failure to learn the lessons from over-reliance on unpredictable partners.
Piecemeal EU unity: The risk of a slip back to (Russian) gas
The EU’s determination to wean itself off Russian dependence proved to be strong throughout 2022. The well-known exception to this is Hungary, which continues to import gas from Russia despite its abhorrent actions in Ukraine. As ECFR’s tracker covers, Hungary has even signed new deals with Gazprom.
However, our researchers also uncovered other risks. A gas interconnector with neighbouring Greece should finally allow Bulgaria to stop relying on Russian pipeline gas – but political uncertainty in the country means it could still resume this relationship with Russia. Meanwhile, landlocked Slovakia, the Czech Republic, and Austria, as well as industry-intensive Germany, are finding the move to diversify away from Russian gas particularly difficult. This is because LNG can be harder to access or because of the sheer quantities of gas they require. If such countries struggle to access sufficient supplies of non-Russian fuels, calls to return to old practices (including using existing pipelines from Russia) could become increasingly popular. Anti-government protests in Prague are already a warning signal. Much depends on whether Germany can secure enough alternative imports, and if its neighbours can rely on Berlin not to keep all of it for itself.
The opportunity costs of the rush to new gas infrastructure
The energy insecurity facing Europe this year has prompted many member states to accelerate some important infrastructure decisions. The deals they and Brussels have concluded with third countries reflect this. Of the 56 deals that the tracker identifies, 33 have infrastructure implications. For example, externally, the EU has committed to investing in the Southern Gas Corridor pipeline to import major quantities of Azeri gas, while some of the existing pipelines (such as those connecting Algeria to Spain) might require increased capacity to service the rising imports.
In addition, a number of infrastructure developments within the EU have taken place. These include a newly inaugurated interconnector between Greece and Bulgaria, plans to expand Croatia’s Adria pipeline and to build a pipeline between Barcelona and Marseille, and new LNG terminals from Germany and France to Ireland and Estonia. These investments in Europe’s energy infrastructure should increase the EU’s energy sovereignty by assuring greater resilience and better integration.
However, there will be an opportunity-cost into choosing to invest in much of this infrastructure. European leaders may need to explain the implications of their choices to a nervous European public already experiencing cost of living pressures. They will need to take care not to invest in infrastructure that could prove obsolete or unduly costly over the longer term. With this in mind, the EU’s strong focus on new gas infrastructure could stymie its future transition away from fossil fuels. Businesses and politicians frequently argue that gas and oil infrastructure built now will pay off over time because it can be repurposed for hydrogen. But the feasibility and cost-effectiveness of a switch to hydrogen is far from proven.
Nuclear energy: A looming return to a heated argument
The role of nuclear power as part of the decarbonisation process has long divided EU member states. Opponents of nuclear power raise concerns around the disposal of nuclear waste, the supply of raw materials, and the reliability of this source of energy, which has come to the fore recently with large numbers of France’s nuclear reactors closing for maintenance.
However, the fluidity in the energy picture in 2022 appears to be causing some member states to reconsider their positions. Countries such as Germany, Belgium, and the Netherlands have prolonged the operation of their nuclear plants. Poland has just selected a company to build the country’s first nuclear plant, and is considering another. Latvia is discussing a possible investment in nuclear, while Sweden is considering expanding its nuclear capacity. There will likely be more EU-level discussions about nuclear energy during the upcoming Swedish EU presidency in spring 2023.
If nuclear power becomes increasingly acceptable and subsidised, this could crowd out some of the political support and financial investment into renewables – announcing the comeback of a heated debate about the relative advantages of these two decarbonisation strategies.
European policymakers are currently cautiously optimistic about the EU’s ability to make it through to spring 2023 without a major crisis. This optimism comes principally from the healthy level of gas storage in the EU, which stands above 95 per cent of capacity according to the International Energy Agency, combined with the warm autumn and winter so far. As ECFR’s Energy Deals Tracker suggests, the challenge now is to prepare for the next few winters, and beyond. There are also positive signs around member states’ willingness to cooperate further on building energy sovereignty, and work together on the supply side. The question of how transparent member states are prepared to be with each other, and with Brussels, about the deals they are making will be tested in Council discussions this week with the European Commission’s proposal for better coordination of gas purchases.
But the clear need remains for the EU and member states to collectively reflect on the strategic outlook for their sustainable energy security – both geographically, to avoid the risk of overdependence on actors with whom relations could potentially worsen, and in terms of ensuring that decarbonisation stays on course. For the latter, they should double down on public and private investment to rapidly scale up their low-carbon energy infrastructure. This will be vital to ensure that clean sources quickly become a viable option for a growing share of the European energy mix.
Economies of scale will be vital, and, to capitalise on these, the EU and member states should look closely at the minilateral forms of cooperation that have recently sprung up. These include the North Sea offshore wind pact agreed by Germany, Denmark, the Netherlands, and Belgium, and its equivalent among the eight EU Baltic Sea countries. Such examples could act as kernels from which pan-EU cooperation can grow. The current adverse economic circumstances facing the EU are significant – but if the bloc slips from the path of decarbonisation, the risks to the EU’s international credibility and the broader global consensus around the Paris climate agreement are huge.
The European Council on Foreign Relations does not take collective positions. ECFR publications only represent the views of their individual authors.